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| 2009/2010 Model Portfolios Blended Income Portfolio High Quality Portfolio High Yield Portfolio |
B & G Foods Gravy Train May End
September 12, 2009
After a good run with nice capital gains and high dividends it looks like the B & G Foods
Enhanced Income Securities (Ticker: BGF) will be the subject of an offer by the company to
purchase the securities.
As you will note the shares have fallen by $1.00 per share in the last 2 days as B & G
announced a 9 million common share offering and at the same time said they would likely use
the proceeds to buy some of their debt--they have 8% notes due in 2011 and 12% notes due in
2016 (these are a part of the EIS securities).
We have known this was a possibility since 8/5 when B & G announced a credit agreement
amendment allowing them to buy back some of the debt..
September 12, 2009
After a good run with nice capital gains and high dividends it looks like the B & G Foods
Enhanced Income Securities (Ticker: BGF) will be the subject of an offer by the company to
purchase the securities.
As you will note the shares have fallen by $1.00 per share in the last 2 days as B & G
announced a 9 million common share offering and at the same time said they would likely use
the proceeds to buy some of their debt--they have 8% notes due in 2011 and 12% notes due in
2016 (these are a part of the EIS securities).
We have known this was a possibility since 8/5 when B & G announced a credit agreement
amendment allowing them to buy back some of the debt..
According to the original prospectus the company can redeem the notes after 10/30/2009. Each
EIS share has 1 common share and $7.15 of the 12% note. Thus the value of the BGF shares is
1 share of BGS and $7.15. Around $16.50 at the closing prices on 9/11/2009.
Regardless we plan to simply hold our EIS shares as we think there is generally little downside
in doing so.
EIS share has 1 common share and $7.15 of the 12% note. Thus the value of the BGF shares is
1 share of BGS and $7.15. Around $16.50 at the closing prices on 9/11/2009.
Regardless we plan to simply hold our EIS shares as we think there is generally little downside
in doing so.
Super Solid 8% Investment From a Super Solid Financial Services
Company
September 13, 2009
We have decided to add a full 5% position of Credit Suisse 7.9% Tier 1 Capital Notes (Ticker:
CRP) to the High Quality Model Portfolio. These shares are callable after 3/28/2013 at
$25/Share.
This purchase will bring the Porfolio up to only 40% invested, which is an even further lag in
getting funds deployed than in the other 2 model portfolios, but just the same it has done fairly
well and will likely beat the goal (7.5%) over the course of the year. We are more concerned in
having the right quality holdings in this model than we are about scoring massive returns
(since this would require massive risk).
Company
September 13, 2009
We have decided to add a full 5% position of Credit Suisse 7.9% Tier 1 Capital Notes (Ticker:
CRP) to the High Quality Model Portfolio. These shares are callable after 3/28/2013 at
$25/Share.
This purchase will bring the Porfolio up to only 40% invested, which is an even further lag in
getting funds deployed than in the other 2 model portfolios, but just the same it has done fairly
well and will likely beat the goal (7.5%) over the course of the year. We are more concerned in
having the right quality holdings in this model than we are about scoring massive returns
(since this would require massive risk).
Credit Suisse has had solid financial results even while continuing to take write downs. We
consider Credit Suisse to be one of---if not the best, banks in the world. They have solid
investment banking services, wealth management, private client banking services and retail
and corporate banking. The retail and corporate banking segment has continued to take the
writedowns while all of the segments produce very nice profits, which have far outweighed the
writedowns.
The Credit Suisse website give very good detailed information on the company (as you might
expect) and we encourage you to take a look here.
The interest on these notes is paid quarterly and is NOT cumulative.
consider Credit Suisse to be one of---if not the best, banks in the world. They have solid
investment banking services, wealth management, private client banking services and retail
and corporate banking. The retail and corporate banking segment has continued to take the
writedowns while all of the segments produce very nice profits, which have far outweighed the
writedowns.
The Credit Suisse website give very good detailed information on the company (as you might
expect) and we encourage you to take a look here.
The interest on these notes is paid quarterly and is NOT cumulative.
in their share prices, which has hurt the portfolio's overall performance (up a measly 4.2%).
At this point as the companies are performing well we will leave them in the portfolio as we
believe they may have strong share price gains ahead. The balance of the issues being
preferreds and debt are from companies that we believe have little short term risk and will
remain in the models.
Our 'Blended Quality' portfolio which is up 6.43% (through 8/9/2009--somewhat higher today)
has 2 issues which we are keeping an eye on---SuperTel Hospitality Preferred and Omega
HealthCare Preferred. Both of these issues could be negative items--SuperTel by the
slowness of the travel business and Omega by any damaging Federal Healthcare Initiatives.
At the current time there is no inevitable problems that we are aware of, but if they look like
more possible in the future we will sell these issues.
Our star performer with near a 15% return (while only 40% invested) the "High Yield" model
has no issues in it which we are selling at the present time---but it does have issues of 3
insurance companies (Selective, Metlife and Prudential) which we are keeping an eye on.
Quite honestly the overall economy is still pretty shaky and these insurance companies are
just as affected by the economy and investment scenario as the banks are---in fact these
issues were priced for bankruptcy only 6 months ago. Something like a 'double dip'
recession would put these companies at great risk--and there will be no bailout for them.
Remember to always keep an eye on your investment---take a one minute glance at your
portfolio daily and if something falls a dollar---check it further. It never pays to hold something
and 'hoping' that evedrything will be ok.
At this point as the companies are performing well we will leave them in the portfolio as we
believe they may have strong share price gains ahead. The balance of the issues being
preferreds and debt are from companies that we believe have little short term risk and will
remain in the models.
Our 'Blended Quality' portfolio which is up 6.43% (through 8/9/2009--somewhat higher today)
has 2 issues which we are keeping an eye on---SuperTel Hospitality Preferred and Omega
HealthCare Preferred. Both of these issues could be negative items--SuperTel by the
slowness of the travel business and Omega by any damaging Federal Healthcare Initiatives.
At the current time there is no inevitable problems that we are aware of, but if they look like
more possible in the future we will sell these issues.
Our star performer with near a 15% return (while only 40% invested) the "High Yield" model
has no issues in it which we are selling at the present time---but it does have issues of 3
insurance companies (Selective, Metlife and Prudential) which we are keeping an eye on.
Quite honestly the overall economy is still pretty shaky and these insurance companies are
just as affected by the economy and investment scenario as the banks are---in fact these
issues were priced for bankruptcy only 6 months ago. Something like a 'double dip'
recession would put these companies at great risk--and there will be no bailout for them.
Remember to always keep an eye on your investment---take a one minute glance at your
portfolio daily and if something falls a dollar---check it further. It never pays to hold something
and 'hoping' that evedrything will be ok.
A Model Portfolio Review
September 16, 2009
We have taken a few minutes to review the 3 model portfolios to see if we had holdings that
should be sold (even though the models are not even half invested) based upon the most
recent information available. Remember that 'buy and hold' is not a viable strategy any
longer so we must stay ever vigilant.
The 'High Quality' portfolio is 40% invested and has performed poorly relative to the other 2
models. The Great Plains Energy (GXP) and Pfizer (PFE) both took dividend reductions earlier
in the year and took haircuts
September 16, 2009
We have taken a few minutes to review the 3 model portfolios to see if we had holdings that
should be sold (even though the models are not even half invested) based upon the most
recent information available. Remember that 'buy and hold' is not a viable strategy any
longer so we must stay ever vigilant.
The 'High Quality' portfolio is 40% invested and has performed poorly relative to the other 2
models. The Great Plains Energy (GXP) and Pfizer (PFE) both took dividend reductions earlier
in the year and took haircuts
If You Think The Recession is Over----How About
Ship Finance (SFL)?
September 18, 2009
If you believe that on a worldwide basis the worst of the recession is behind us a person has
to give a close look at Ship Finance LTD (SFL) as strong potential BUY.
While the Dry Bulk Carriers (Diana, Dryships etc.) were big dividend payers in previous years,
almost without exception all dividends have stopped. The reason is simple---day rates for
ship charters have
Ship Finance (SFL)?
September 18, 2009
If you believe that on a worldwide basis the worst of the recession is behind us a person has
to give a close look at Ship Finance LTD (SFL) as strong potential BUY.
While the Dry Bulk Carriers (Diana, Dryships etc.) were big dividend payers in previous years,
almost without exception all dividends have stopped. The reason is simple---day rates for
ship charters have
fallen by as much as 75% with the decreased demand. SFL does have some dry bulk ships,
but that is only a small part of their business.
Why is Ship Finance Limited different? They are different because they have their ships
chartered out with an average charter length of over 13 Years! Now be aware that SFL was
originally wholly owned by Frontline Limited and most of their fleet is leased to Frontline (FRO).
Frontline is the worlds largest shipping company and the majority of the business is
transporting Crude Oil. Most of their ships are owned by SFL and they have a profit sharing
agreement on top of the base charter rate. But the real bottom line is that the company had a
charter backlog of over 7 billion dollars (over $95.00 per share) as of 6/30/2009.
For a closer look at what Ship Finance (SFL) has to offer check here.
To look further at Frontline (FRO) check here.
SFL has a current yield of 9.9% and has traded as high as $26.50---and now is trading at
$12.44. We think with any economic strength worldwide that there is good odds that SFL will
give one a nice capital gain along with the 9.9% yield.
We will be adding some of this to our personal account as well as adding a 5% position to the
'Blended Income' Model Portfolio.
As always do your due diligence and remember that buy and hold is an old strategy (so check
your investments daily).
NOTE--Added 9/20/09--SFL has call options available and we will sell covered calls against
our positions in both our personal portfolio and Model Portfolio. This will limit our upside
but add a bit of return to our healthy dividend return.
but that is only a small part of their business.
Why is Ship Finance Limited different? They are different because they have their ships
chartered out with an average charter length of over 13 Years! Now be aware that SFL was
originally wholly owned by Frontline Limited and most of their fleet is leased to Frontline (FRO).
Frontline is the worlds largest shipping company and the majority of the business is
transporting Crude Oil. Most of their ships are owned by SFL and they have a profit sharing
agreement on top of the base charter rate. But the real bottom line is that the company had a
charter backlog of over 7 billion dollars (over $95.00 per share) as of 6/30/2009.
For a closer look at what Ship Finance (SFL) has to offer check here.
To look further at Frontline (FRO) check here.
SFL has a current yield of 9.9% and has traded as high as $26.50---and now is trading at
$12.44. We think with any economic strength worldwide that there is good odds that SFL will
give one a nice capital gain along with the 9.9% yield.
We will be adding some of this to our personal account as well as adding a 5% position to the
'Blended Income' Model Portfolio.
As always do your due diligence and remember that buy and hold is an old strategy (so check
your investments daily).
NOTE--Added 9/20/09--SFL has call options available and we will sell covered calls against
our positions in both our personal portfolio and Model Portfolio. This will limit our upside
but add a bit of return to our healthy dividend return.
Chicken Investing
October 1, 2009
There is nothing we hate more than 'trading' excessively in our accounts. Not that
commissions are meaningful, but we spend a fair amount of time building a solid portfolio
so to blow a bunch of issues out is contrary to the way we wish to operate.
Starting yesterday morning we DID start blowing out issues in our personal portfolio that we
had solid gains in--to go to a heavier cash position. We are greatly disturbed by the lack of
consumer confidence and the weak employment numbers. We were up to 70-75% invested
and have taken it down to 40% since yesterday. We are up 13% YTD and plan to keep those
gains and income issues are not acting right since yesterday. Issues such as the Xcel
Energy Exchange Traded Debt (XCJ) have tumbled hard. As you can see below it has taken
a fairly large 2 day drop. While I expected it to back off a bit as it went ex-dividend a few days
ago--this is something extraordinary.
October 1, 2009
There is nothing we hate more than 'trading' excessively in our accounts. Not that
commissions are meaningful, but we spend a fair amount of time building a solid portfolio
so to blow a bunch of issues out is contrary to the way we wish to operate.
Starting yesterday morning we DID start blowing out issues in our personal portfolio that we
had solid gains in--to go to a heavier cash position. We are greatly disturbed by the lack of
consumer confidence and the weak employment numbers. We were up to 70-75% invested
and have taken it down to 40% since yesterday. We are up 13% YTD and plan to keep those
gains and income issues are not acting right since yesterday. Issues such as the Xcel
Energy Exchange Traded Debt (XCJ) have tumbled hard. As you can see below it has taken
a fairly large 2 day drop. While I expected it to back off a bit as it went ex-dividend a few days
ago--this is something extraordinary.
XCJ is not one of the issues we sold--we did sell Ship Finance (SFL), Ford Motor Debt
(F-PA), Windstream (WIN), Stonmor (STON), Bankamerica Preferred (BAC-PZ), Constellation
Energy Preferred (CEG-PA) and Provident Energy (PVX). These issues are not as strong as
we would like if we are going into a tough economy again (or still).
We will be looking to weed issues out of the model portfolios tomorrow and you can count on
us moving out weak issues.
Any moves we make at this point in time are simply to preserve capital (and nice gains for
the year), with the intent to start moving back in as the picture gets a bit clearer in the
economy. In reality if we go into a weak period there may again be opportunities to buy back
some of the same securities that we are selling at lower prices.
(F-PA), Windstream (WIN), Stonmor (STON), Bankamerica Preferred (BAC-PZ), Constellation
Energy Preferred (CEG-PA) and Provident Energy (PVX). These issues are not as strong as
we would like if we are going into a tough economy again (or still).
We will be looking to weed issues out of the model portfolios tomorrow and you can count on
us moving out weak issues.
Any moves we make at this point in time are simply to preserve capital (and nice gains for
the year), with the intent to start moving back in as the picture gets a bit clearer in the
economy. In reality if we go into a weak period there may again be opportunities to buy back
some of the same securities that we are selling at lower prices.
Chicken Investing Continued
November 1, 2009
We have continued to be damned busy in our 'real' jobs and have had little time to be
keeping up with our writing on here---but we have paid attention to our personal investments.
Here is how we have been handling our personal investments this past month.
We have purchased only 1 item--a 3% position in National Rural Utilities exchange traded
debt (Ticker: NRC)--which we have sold already after capturing the dividend--for a net gain of
1.5%. We have sold many items that we still held after the month ago sales (see below).
We sold large holdings of Xcel Energy Debt (XCJ) and TCF BankDebt (TCB-PA)--both
November 1, 2009
We have continued to be damned busy in our 'real' jobs and have had little time to be
keeping up with our writing on here---but we have paid attention to our personal investments.
Here is how we have been handling our personal investments this past month.
We have purchased only 1 item--a 3% position in National Rural Utilities exchange traded
debt (Ticker: NRC)--which we have sold already after capturing the dividend--for a net gain of
1.5%. We have sold many items that we still held after the month ago sales (see below).
We sold large holdings of Xcel Energy Debt (XCJ) and TCF BankDebt (TCB-PA)--both
great holdings which we will buy back after we get some market stabilization. We are now
only 20% invested.
We look for some very rocky times in the next week with employment numbers out later in the
week. Capital conservation--and maintaining our 13% YTD gain is our goal and we believe
that we will see opportunities ahead---but only after a market setback.
We most definitely will empty part of the model portfolios starting on Monday to maintain
those gains
only 20% invested.
We look for some very rocky times in the next week with employment numbers out later in the
week. Capital conservation--and maintaining our 13% YTD gain is our goal and we believe
that we will see opportunities ahead---but only after a market setback.
We most definitely will empty part of the model portfolios starting on Monday to maintain
those gains
High Yield Porfolio Updated
through 11/2/2009
11/4/2009
We have updated our High Yield Model
Portfolio through 11/2/2009.
YTD our gain is a snappy 15.9% while only
being 44% invested on 11/2.
Additionally it should be noted that we have
sold the Prudential Subordinated Debt (PHR)
from the portfolio. We are simply lightening
up even further consistent with our capital
preservation goal. Additionally we believe we
may have substantial setbacks in the market
in the months ahead and want to be even
more conservative than we already have
been YTD.
through 11/2/2009
11/4/2009
We have updated our High Yield Model
Portfolio through 11/2/2009.
YTD our gain is a snappy 15.9% while only
being 44% invested on 11/2.
Additionally it should be noted that we have
sold the Prudential Subordinated Debt (PHR)
from the portfolio. We are simply lightening
up even further consistent with our capital
preservation goal. Additionally we believe we
may have substantial setbacks in the market
in the months ahead and want to be even
more conservative than we already have
been YTD.
Whats Next??? NEW
February 7, 2010
After a week in which the S & P 500 index fell as much as 5% from the weekly high to the
weekly low--and ended up down 2% on the week what is next, for us, the income investor?
We have reviewed the model portfolios and are considering whether it is time to unload
energy related common shares (Provident Energy-PVX and TC Pipelines-TCLP). We think
it is likely that we will keep TCLP and sell the PVX in which we have a rather large gain.
Energy prices continue their move down and the continued weakness in the employment
marketplace indicates that demand is going to remain weak. Given that the models
remain underweighted in equities we don't see urgency in making further changes at this
time. The models and the personal portfolios took only minor damage last week--and
unless we see further fiscal turmoil in the European economies we don't expect too much
further weakness in our issues.
As we are searching for new investments we likely will only make commitments in the near
future to high quality issues---as the lower quality issues will get hit if we are wrong on
economic stability and we start to double dip the economy.
Interest rates which had traded in a 15-20 basis point range the last month or 2 fell out of
the range with the announcement of the poor employment numbers. We think they likely
will creep back up this week (unless we get more panic in Europe and a big flight to safety
takes place)--but it looks like we are months away from what we think will be a 1/2% (or
more) rise in rates. Of course this thought could change if we escalate trade fights with the
Chinese and they stay away from our treasury auctions.
Third Leg to Recovery Not Likely to Appear Soon
Employment isn't going to improve anytime soon
February 4, 2010 Noon
With the equity markets in somewhat of a freefall today and treasury yields plunging
because of lackluster employment prospects and sovereign debt issues around the world
we would be quite surprised to see a recovery of any magnitude in the U.S. anytime soon.
We have reviewed the model portfolios (as well as our personal portfolio) and are well
satisfied that we will generally weather the current storm in fine fashion. While we haven't
calculated the model portfolio damage--we have calculated our personal portfolio and our
losses are a tiny fraction of the general equity market losses (1/4 of 1% loss versus over
2% on the S & P 500 loss).
At this time and with the current uncertainties one should be reviewing their income issues
and considering weeding out some of the lower quality issues---if we should double dip
this recession the weak issues will be at high risk for loss of payouts.
We are maintaining fairly high levels of cash in all portfolios as there is no rush to
invest---there are always bargains coming available.
Still a Slowly Improving Economy???
January 26, 2010
With the Conference Boards Consumer Confidence numbers we have now fulfilled 2 of our
3 legs that we need for a real recovery. Consumer Confidence is not moving hugely higher
but instead is just moving gradually--which we prefer for a lasting recovery.
Prices of fuel, and in particular gasoline, are moving a bit lower (although we need this to
be only slightly lower--just not dramatically higher--not higher than around 2.70 on gasoline).
Our third leg is employment--the most important and likely the most difficult to get
moving in the right directly. The next employment data is released released on February
5, 2010. Our view is that this will be a somewhat neutral number -- we are not personally
seeing anecdotal evidence of employment
We get the feeling that this is going to be a very gradual recovery. With 1 month Treasury
Bills trading at 1 basis point it is obvious that there is still a lot of fear out there and the
possibility of a 'double dip' is still looked at as a possibility--in fact it is personally our
greatest worry
Our best guess is that the equity markets will essentially go no where in the next month
and income issues that we invest in will remain stable.
We continue to stay away from most REITs and the Shipping and Transportation issues
(excepting select REIT preferred issues) as they do not fulfill the goal of giving us decent
'income' at this time. The biggest hazard to equity markets right now is the Obama
Administration which is continually beating on the marketplace as it is the populist thing to
do.
Dow and S & P Get Smacked--Income Issues hold Up
Well
January 22, 2010
Finally with the big smackdown of Thursday on the Dow and S & P stocks we can see the
good results of holding a decently diversified income portfolio. With the Dow off 2% and the
S & P 500 off 1.9%, in general, our models and personal portfolios were off much less than
1%. These are the types of results we have looked for--a preservation of capital with decent
income on the portfolios. Our expectations are that when the equity markets are down we
will see much smaller directional moves in our portfolios.
As you may have noted we quit covering REITS more than a year ago simply because with
the exception of selected Preferred issues (as well as some of the healthcare REITS) the
REITS are very dangerous. Just glancing over the Commercial/Industrial REIT Sector we
noticed that on average they were off 4% on Thursday--twice the Dow loss. There really is
no improvement in sight for many REIT areas and we believe that before improvement
comes there is much more pain to be had by some of the companies. Use extreme care
around the REITS.
Time to Let Supertel Preferred Go
January 16, 2010
We have held 400 SuperTel Hospitality Preferred shares (Ticker:SPPRP) in our Blended
Income Model Portfolio since 3/18/2009 and they have paid us an annualized yield of over
10% (based upon our $6.44/share purchase price)---but at this time we think it is time to
sell these out of the model. We have a decent capital gain on the shares and it is seldom
wrong to take a profit.
The issue is this---like most Hotel/Motel REITS SuperTels (Ticker: SPPR) profits have been
poor over the last year----Funds From Operations (FFO) remains very modestly positive.
Obviously they are paying no dividend on the common shares--which conserves cash--and
they sold 2 more properties in October, 2009 which again will help generate some cash.
Even with these measures It is our belief that the hotel/motel business is only marginally
improving and if a REIT needs to conserve more cash they will turn to a suspension of any
preferred stock dividends they are paying. The December quarter is a slow quarter for
SuperTel and depending on results they could look at suspending the preferred payout.
Quite simply---we had counted on an improvement in the sector by this time and not seeing
that happening we are happy to take our profits and search elsewhere.
It is our belief that any dividend suspension would send the share price from the current
$8.25 to around $2.00.
Model Portfolio Additions
January 5, 2010
Today we have added a few issues to our model portfolio.
1st we have added almost a 7% position in TC Pipelines (Ticker:TCLP) to our Blended
Income Model Portfolio. This is a Master Limited Partnership which was the subject of an
email we sent out a few weeks ago--you can read our info here.
2nd we are adding BGE 6.2% Capital Trust Preferred (BGE-PB) to our High Quality Model
Portfolio --we will add almost a 6% position. This issue has a current yield of just under 7%
and at around $22/Share we think it has a good 5% of upside on the capital gain side in the
next year--which would give a total return of 12%--way above our 7.5% goal for this portfolio.
You can check out BGE (Baltimore Gas and Electric--a unit of Constellation Energy) here.
Watch Your Bond Funds
December 29, 2009
As we get close to closing out 2009 and are looking at interest rates that have now moved
up near 1/2% in the last couple of weeks you need to review your portfolio with particular
emphasis on high yield bond funds.
Through the course of the year high yield funds have had dramatic returns--we have held a
number of funds off and on and the capital gains have been hugely helpful to our portfolios.
Currently we hold the Pimco High Income Fund (PHK) in our Blended Income Model
Portfolio as well as in our personal portfolio and have more than doubled our investment.
These high yield funds ARE leveraged funds and could give back a fair portion of their share
price gains in the next 6 months if interest rates rise. While the yields are good we plan to
sell these from our portfolio this week and not give back any gains on these issues.
OTELCO Goes on Sale
December 17, 2009--Noon CST
Earlier this week we sent out an email note to those signed up to receive it on a little
Telecom company named OTELCO (Ticker:OTT). Today the general market selloff has
presented an opportunity for us to pick up some of this issue for our personal account and
for our HIGH YIELD MODEL PORTFOLIO at sale prices. The issue started the week in the
$14.50 range and now has traded down to $13.80, as we write this, on some large block
sales. The current yield is over 12%.
Check the company out here.
Seemingly Closer to Recovery?
December 10, 2009
We have said in this column for a number of years that the recovery of the U.S. economy is
predicated by 3 items---consumer confidence, fuel prices and employment Of course a
large part of confidence is driven by employment and fuel prices (for transportation and for
heat).It appears that employment is healing (if you believe the numbers) and in recent days
energy prices have moderated (although nat gas has moved up some--the one we see day
in and day out is 'at the pump')---so we need the confidence part to get to the positive side of
things.
As this chart shows (from 'The Conference Board")
confidence has been relatively flat the last couple of
months and we believe that we are due for a move
up with the next reading (around 12/23) simply
because of the lowering of the unemployment rate
and the declining price of fuel at the pump. These
types of data tend to 'feed' on each other and we think
that is the case here.
What does it mean outside of things are getting a little better? We think it means very little
at this point in time--we think stocks are going nowhere over the next 6 months as they have
gotten ahead of themselves. We think interest rates are going nowhere over the next
month, but may move higher in the next 60-90 days in reaction to perceived economic
strength.
PLEASE NOTE that 1and 3 month treasury bill rates remain at extremely low rates meaning
that there is a lot of money willing to accept a negative (inflation adjusted) return to keep
their money safe. Quite a few people are NOT willing to believe that things are getting better.
Caution Needed on Royalty Trusts and Limited
Partnerships
December 7, 2009
We spent time this weekend reading some quarterly reports which reminded us of the
particular care that must be taken when purchasing Canadian and US Royalty Trusts or
Master Limited Partnerships.
We all know that the companies of the sectors mentioned generally explore for and produce
oil and natural gas. Of course they forward sell much of their production when prices spike
up which helps maintain their generous distributions to holders of their securities. With
these hedges there are benefits and in some cases there are high risks. Some of the
companies simply explore for and produce natural resources---others explore for, produce
and transport natural resources. Others explore for, produce and process products---and
this may included purchasing product from others and this can produce large future cash
liabilities--which are a hazard to the distribution.
For Instance take Paramount Energy--a Canadian Royalty Trust--mainly focusing on natural
gas. Over 50% of their stated revenue is hedging income from forward sales or financial
hedges of gas (actual price for the quarter was $3.41/mcfe (Canadian Dollars) while the
realized price with hedging was $7.51). If we are to assume that natural gas prices stay
low---over time-- the company will not have the financial hedges in place to replace the
revenue--and thus the payouts will have to be reduced further (the current yield is 12.5%).
These companies are not foolish---when prices go way up they forward sell their
production---but not all their production and only forward for a year or 2 at most---so while
they are able to maintain payouts for some amount if time it is a future risk.
Now if you look at Provident Energy Trust (which we have held, but are considering selling)
which has a midstream business it is a different story. The midstream business
purchases natural gas on a forward basis from others -- and currently they have a liability of
143 million (Canadian) because they have contracted to buy gas at a price much higher
than the current market price. Quarterly they must 'mark to market', but these are unrealized
gains/losses-so that doesn't affect cash. As time passes and settlement is made cash will
be affected---thus the ability to pay distributions is affected.
The point of this windy rambling is that you must know the derivatives that your trust has in
place to know how safe your payout is in the future.
US Cellular Calls Exchange Traded Debt
December 2, 2009
We missed the announcement 10 days ago from US Cellular that they have called their
exchange traded debt (8 3/4% Senior Notes) (Ticker:UZG). The call is effective 12/24/2009
at the price of $25.00 plus accrued interest (around 35 cents). These were issued in
11/2002 and thus have been callable for 2 years. We have 200 shares of this issue in the
High Yield Model Portfolio which were purchased in March at a price of $19.75. With
interest payments this gives us a gain of about 30% in 9 months.
We will go ahead and let these go to call.
This goes to show that there may be other calls of undervalued high yielding issues if the
issuer is able to go the credit markets and borrow at a rate less than those paid on
outstanding issues.
Adding Double Eagle Petroleum Preferred
November 29, 2009 10 PM
We are adding a 5% position of Double Eagle Petroleum Preferred Shares (Ticker:DBLEP)
to our Blended Model Portfolio.
These preferred shares were highlighted in our email suggestion from 2 weeks ago--of
course we waited a bit thinking we might get them on 'sale' one day--instead they are up
over 5% since our email.
These shares have a current yield of 9.84% and the shares go ex-dividend in mid
December.
This purchase will bring this portfolio up near 50% invested and will help us get our end of
year return on this portfolio up over 10% (we hope).
Please go to this page for further links on this security.
A 'Shoe' Drops!!!!
November 26, 2009 4 PM Central
It appears that Dubai World (controlled by the emirate of Dubai in the United Arab Emirates)
is bankrupt.
In our article below from 6 days ago we asked 'what shoe' was about to drop--now we
know. We are highly suspicious of who knew this in advance and started the heavy
movement into treasury bills.
While we can't totally predict tomorrows reaction---or whether UAE will step in at the last
minute for a bail out--we can say foreign markets are down 2 to 4 % and the S&P futures
are off 2-3% in the U.S.
The true damage is probably less important that what it may portend for all the others on the
edge of bankruptcy.
We are fortunate to be only 25% invested in our personal portfolio and in fact hold calls on
the SDS (double short S&P 500)---essentially we have no risk in the downside at this
minute. Of course the models are at risk--although not nearly the risk they would have if
they were fully invested. Expect treasuries to melt UP.
Safety Seekers Out in Force
November 20, 2009
Watching T-Bill yields this week has to make you wonder what shoe is going to drop soon.
While we have seen the 1 month bill trading with yields of 1 basis point quite a lot in the last
year-we have not seen the 3 month bill trading at that level since last December. Here is a
chart of 3 month treasury yields for the last 2 years.
Obviously there is a dramatic rush to 'safety'. When it happened in 2008 it happened as the
equity markets were crashing down.
To understand the overall market sentiment you need to watch the t-bill rates---as we now
see a lot of money piling into instruments that will pay 10 cents a year (annualized) on a
$1000 investment. You have to believe that there are some serious coming issues in the
next couple of months if you are willing to invest at these rates.
Market Euphoria Continues--Treasury Bond Yields Plunge
November 16, 2009 11 pm
The melt up in the equity markets continues--seemingly without an end in sight. It feeds on
itself---here again what are you going to do. We don't buy regular equities generally so we
just sit and watch what we are missing (or not missing--since we are most happy to sleep
well at nights and collect our dividends and interest).
Interest rates are falling again---seemingly saying 'things are tough out there'. The talking
heads are quite happy not facing up to the fact that gold is going crazy, the dollar is falling
daily, the federal government is issuing $100 billion in new debt every month and I am
afraid the housing and employment situation is not even close to improving.
Regardless of the above we are hunting and buying good income issues (while keeping
one eye on the potential economic surprises out there).
We have updated the High Quality Income Model---and it has not done nearly as well as the
High Yield Model--gaining only 4.5% year to date. This is mostly a function of being totally
underinvested. On the other hand we are happy with the portfolio being built and look
forward to better days ahead as the portfolio becomes more fully invested.
Protective Life Corp.--Solidly in the Black--a Number of Available
Picks
November 16, 2009
Proptective Life Corp., which is a smallish life insurance company located in Birmingham,
Alabama has gotten the company going back in the right direction--with the write offs behind
it. Like most insurers they had large write downs last year and hopefully with the economy
healing they will not have those large negatives ahead.
The company has a number of issues available for the income investor--3 trust preferred
issues, 2 exchange traded debt issues and of course the common shares which carry a
2.75% yield.
The way we look at the available issues is they are 5 debt issues and then the common.
The 5 issues are all senior to the common and of course somewhat safer.
The issues are
PLC Capital Trust IV--7 1/4% (Ticker--PL-PA)
PLC Capital Trust V--6 1/8% (Ticker--PL-PB)
PLC Capital Trust III--7 1/2% (Ticker--PL-PS)
Protective Life Capital Securities --7 1/4% (Ticker---PL-PD)
Protective Life 8% Senior Notes (Ticker--PLP)
All of these issues trade with current yields of 8.6 to 8.85%---super yields when they have
become increasingly hard to find. Only the PL-PD issue goes ex-dividend in December if
you are just looking to capture the dividend.
We will be adding a full 10% position (500 Shares) to our High Quality Model Portfolio of
the PL-PD issue today.
Chicken Investing Over--Back to the Grind
November 11, 2009
We have determined that no one wants to look at the realities of this dangerous market and
the economy so we just as well go about the business of getting the model portfolios
invested. Needless to say the good odds of a 'double dip' in this economy over the winter
makes us quite nervous.
Note that we have updated the High Yield Model and it has been performing very well--up
over 15% through November 2. We did sell just one item out of that portfolio--and now will
begin to add some more items in. The Blended and the High Quality Income models
remain underinvested and we hope we will have time to get some more securities in these
in the weeks ahead.
It should be noted that we are staying away from the REIT common stocks--as we have all
year. Certainly there are some decent companies out in that universe--but we just don't
care to buy the risk. Better to stay with the preferreds that many of the companies have
available.
We will be purchasing mostly exchange traded debt and trust preferreds (as we have
mostly done in the past) as these are senior to all preferreds that are out there (Trust
Preferreds are preferreds issued by a trust which holds the debt of the issuing corporation
and receives interest from the corporation which they then pay you as a dividend).
But beyond the above we will be watching this economy damned closely as the
employment situation, fuel prices and consumer confidence are all negative and we could
easily tip this economy into recession in the months ahead.
February 7, 2010
After a week in which the S & P 500 index fell as much as 5% from the weekly high to the
weekly low--and ended up down 2% on the week what is next, for us, the income investor?
We have reviewed the model portfolios and are considering whether it is time to unload
energy related common shares (Provident Energy-PVX and TC Pipelines-TCLP). We think
it is likely that we will keep TCLP and sell the PVX in which we have a rather large gain.
Energy prices continue their move down and the continued weakness in the employment
marketplace indicates that demand is going to remain weak. Given that the models
remain underweighted in equities we don't see urgency in making further changes at this
time. The models and the personal portfolios took only minor damage last week--and
unless we see further fiscal turmoil in the European economies we don't expect too much
further weakness in our issues.
As we are searching for new investments we likely will only make commitments in the near
future to high quality issues---as the lower quality issues will get hit if we are wrong on
economic stability and we start to double dip the economy.
Interest rates which had traded in a 15-20 basis point range the last month or 2 fell out of
the range with the announcement of the poor employment numbers. We think they likely
will creep back up this week (unless we get more panic in Europe and a big flight to safety
takes place)--but it looks like we are months away from what we think will be a 1/2% (or
more) rise in rates. Of course this thought could change if we escalate trade fights with the
Chinese and they stay away from our treasury auctions.
Third Leg to Recovery Not Likely to Appear Soon
Employment isn't going to improve anytime soon
February 4, 2010 Noon
With the equity markets in somewhat of a freefall today and treasury yields plunging
because of lackluster employment prospects and sovereign debt issues around the world
we would be quite surprised to see a recovery of any magnitude in the U.S. anytime soon.
We have reviewed the model portfolios (as well as our personal portfolio) and are well
satisfied that we will generally weather the current storm in fine fashion. While we haven't
calculated the model portfolio damage--we have calculated our personal portfolio and our
losses are a tiny fraction of the general equity market losses (1/4 of 1% loss versus over
2% on the S & P 500 loss).
At this time and with the current uncertainties one should be reviewing their income issues
and considering weeding out some of the lower quality issues---if we should double dip
this recession the weak issues will be at high risk for loss of payouts.
We are maintaining fairly high levels of cash in all portfolios as there is no rush to
invest---there are always bargains coming available.
Still a Slowly Improving Economy???
January 26, 2010
With the Conference Boards Consumer Confidence numbers we have now fulfilled 2 of our
3 legs that we need for a real recovery. Consumer Confidence is not moving hugely higher
but instead is just moving gradually--which we prefer for a lasting recovery.
Prices of fuel, and in particular gasoline, are moving a bit lower (although we need this to
be only slightly lower--just not dramatically higher--not higher than around 2.70 on gasoline).
Our third leg is employment--the most important and likely the most difficult to get
moving in the right directly. The next employment data is released released on February
5, 2010. Our view is that this will be a somewhat neutral number -- we are not personally
seeing anecdotal evidence of employment
We get the feeling that this is going to be a very gradual recovery. With 1 month Treasury
Bills trading at 1 basis point it is obvious that there is still a lot of fear out there and the
possibility of a 'double dip' is still looked at as a possibility--in fact it is personally our
greatest worry
Our best guess is that the equity markets will essentially go no where in the next month
and income issues that we invest in will remain stable.
We continue to stay away from most REITs and the Shipping and Transportation issues
(excepting select REIT preferred issues) as they do not fulfill the goal of giving us decent
'income' at this time. The biggest hazard to equity markets right now is the Obama
Administration which is continually beating on the marketplace as it is the populist thing to
do.
Dow and S & P Get Smacked--Income Issues hold Up
Well
January 22, 2010
Finally with the big smackdown of Thursday on the Dow and S & P stocks we can see the
good results of holding a decently diversified income portfolio. With the Dow off 2% and the
S & P 500 off 1.9%, in general, our models and personal portfolios were off much less than
1%. These are the types of results we have looked for--a preservation of capital with decent
income on the portfolios. Our expectations are that when the equity markets are down we
will see much smaller directional moves in our portfolios.
As you may have noted we quit covering REITS more than a year ago simply because with
the exception of selected Preferred issues (as well as some of the healthcare REITS) the
REITS are very dangerous. Just glancing over the Commercial/Industrial REIT Sector we
noticed that on average they were off 4% on Thursday--twice the Dow loss. There really is
no improvement in sight for many REIT areas and we believe that before improvement
comes there is much more pain to be had by some of the companies. Use extreme care
around the REITS.
Time to Let Supertel Preferred Go
January 16, 2010
We have held 400 SuperTel Hospitality Preferred shares (Ticker:SPPRP) in our Blended
Income Model Portfolio since 3/18/2009 and they have paid us an annualized yield of over
10% (based upon our $6.44/share purchase price)---but at this time we think it is time to
sell these out of the model. We have a decent capital gain on the shares and it is seldom
wrong to take a profit.
The issue is this---like most Hotel/Motel REITS SuperTels (Ticker: SPPR) profits have been
poor over the last year----Funds From Operations (FFO) remains very modestly positive.
Obviously they are paying no dividend on the common shares--which conserves cash--and
they sold 2 more properties in October, 2009 which again will help generate some cash.
Even with these measures It is our belief that the hotel/motel business is only marginally
improving and if a REIT needs to conserve more cash they will turn to a suspension of any
preferred stock dividends they are paying. The December quarter is a slow quarter for
SuperTel and depending on results they could look at suspending the preferred payout.
Quite simply---we had counted on an improvement in the sector by this time and not seeing
that happening we are happy to take our profits and search elsewhere.
It is our belief that any dividend suspension would send the share price from the current
$8.25 to around $2.00.
Model Portfolio Additions
January 5, 2010
Today we have added a few issues to our model portfolio.
1st we have added almost a 7% position in TC Pipelines (Ticker:TCLP) to our Blended
Income Model Portfolio. This is a Master Limited Partnership which was the subject of an
email we sent out a few weeks ago--you can read our info here.
2nd we are adding BGE 6.2% Capital Trust Preferred (BGE-PB) to our High Quality Model
Portfolio --we will add almost a 6% position. This issue has a current yield of just under 7%
and at around $22/Share we think it has a good 5% of upside on the capital gain side in the
next year--which would give a total return of 12%--way above our 7.5% goal for this portfolio.
You can check out BGE (Baltimore Gas and Electric--a unit of Constellation Energy) here.
Watch Your Bond Funds
December 29, 2009
As we get close to closing out 2009 and are looking at interest rates that have now moved
up near 1/2% in the last couple of weeks you need to review your portfolio with particular
emphasis on high yield bond funds.
Through the course of the year high yield funds have had dramatic returns--we have held a
number of funds off and on and the capital gains have been hugely helpful to our portfolios.
Currently we hold the Pimco High Income Fund (PHK) in our Blended Income Model
Portfolio as well as in our personal portfolio and have more than doubled our investment.
These high yield funds ARE leveraged funds and could give back a fair portion of their share
price gains in the next 6 months if interest rates rise. While the yields are good we plan to
sell these from our portfolio this week and not give back any gains on these issues.
OTELCO Goes on Sale
December 17, 2009--Noon CST
Earlier this week we sent out an email note to those signed up to receive it on a little
Telecom company named OTELCO (Ticker:OTT). Today the general market selloff has
presented an opportunity for us to pick up some of this issue for our personal account and
for our HIGH YIELD MODEL PORTFOLIO at sale prices. The issue started the week in the
$14.50 range and now has traded down to $13.80, as we write this, on some large block
sales. The current yield is over 12%.
Check the company out here.
Seemingly Closer to Recovery?
December 10, 2009
We have said in this column for a number of years that the recovery of the U.S. economy is
predicated by 3 items---consumer confidence, fuel prices and employment Of course a
large part of confidence is driven by employment and fuel prices (for transportation and for
heat).It appears that employment is healing (if you believe the numbers) and in recent days
energy prices have moderated (although nat gas has moved up some--the one we see day
in and day out is 'at the pump')---so we need the confidence part to get to the positive side of
things.
As this chart shows (from 'The Conference Board")
confidence has been relatively flat the last couple of
months and we believe that we are due for a move
up with the next reading (around 12/23) simply
because of the lowering of the unemployment rate
and the declining price of fuel at the pump. These
types of data tend to 'feed' on each other and we think
that is the case here.
What does it mean outside of things are getting a little better? We think it means very little
at this point in time--we think stocks are going nowhere over the next 6 months as they have
gotten ahead of themselves. We think interest rates are going nowhere over the next
month, but may move higher in the next 60-90 days in reaction to perceived economic
strength.
PLEASE NOTE that 1and 3 month treasury bill rates remain at extremely low rates meaning
that there is a lot of money willing to accept a negative (inflation adjusted) return to keep
their money safe. Quite a few people are NOT willing to believe that things are getting better.
Caution Needed on Royalty Trusts and Limited
Partnerships
December 7, 2009
We spent time this weekend reading some quarterly reports which reminded us of the
particular care that must be taken when purchasing Canadian and US Royalty Trusts or
Master Limited Partnerships.
We all know that the companies of the sectors mentioned generally explore for and produce
oil and natural gas. Of course they forward sell much of their production when prices spike
up which helps maintain their generous distributions to holders of their securities. With
these hedges there are benefits and in some cases there are high risks. Some of the
companies simply explore for and produce natural resources---others explore for, produce
and transport natural resources. Others explore for, produce and process products---and
this may included purchasing product from others and this can produce large future cash
liabilities--which are a hazard to the distribution.
For Instance take Paramount Energy--a Canadian Royalty Trust--mainly focusing on natural
gas. Over 50% of their stated revenue is hedging income from forward sales or financial
hedges of gas (actual price for the quarter was $3.41/mcfe (Canadian Dollars) while the
realized price with hedging was $7.51). If we are to assume that natural gas prices stay
low---over time-- the company will not have the financial hedges in place to replace the
revenue--and thus the payouts will have to be reduced further (the current yield is 12.5%).
These companies are not foolish---when prices go way up they forward sell their
production---but not all their production and only forward for a year or 2 at most---so while
they are able to maintain payouts for some amount if time it is a future risk.
Now if you look at Provident Energy Trust (which we have held, but are considering selling)
which has a midstream business it is a different story. The midstream business
purchases natural gas on a forward basis from others -- and currently they have a liability of
143 million (Canadian) because they have contracted to buy gas at a price much higher
than the current market price. Quarterly they must 'mark to market', but these are unrealized
gains/losses-so that doesn't affect cash. As time passes and settlement is made cash will
be affected---thus the ability to pay distributions is affected.
The point of this windy rambling is that you must know the derivatives that your trust has in
place to know how safe your payout is in the future.
US Cellular Calls Exchange Traded Debt
December 2, 2009
We missed the announcement 10 days ago from US Cellular that they have called their
exchange traded debt (8 3/4% Senior Notes) (Ticker:UZG). The call is effective 12/24/2009
at the price of $25.00 plus accrued interest (around 35 cents). These were issued in
11/2002 and thus have been callable for 2 years. We have 200 shares of this issue in the
High Yield Model Portfolio which were purchased in March at a price of $19.75. With
interest payments this gives us a gain of about 30% in 9 months.
We will go ahead and let these go to call.
This goes to show that there may be other calls of undervalued high yielding issues if the
issuer is able to go the credit markets and borrow at a rate less than those paid on
outstanding issues.
Adding Double Eagle Petroleum Preferred
November 29, 2009 10 PM
We are adding a 5% position of Double Eagle Petroleum Preferred Shares (Ticker:DBLEP)
to our Blended Model Portfolio.
These preferred shares were highlighted in our email suggestion from 2 weeks ago--of
course we waited a bit thinking we might get them on 'sale' one day--instead they are up
over 5% since our email.
These shares have a current yield of 9.84% and the shares go ex-dividend in mid
December.
This purchase will bring this portfolio up near 50% invested and will help us get our end of
year return on this portfolio up over 10% (we hope).
Please go to this page for further links on this security.
A 'Shoe' Drops!!!!
November 26, 2009 4 PM Central
It appears that Dubai World (controlled by the emirate of Dubai in the United Arab Emirates)
is bankrupt.
In our article below from 6 days ago we asked 'what shoe' was about to drop--now we
know. We are highly suspicious of who knew this in advance and started the heavy
movement into treasury bills.
While we can't totally predict tomorrows reaction---or whether UAE will step in at the last
minute for a bail out--we can say foreign markets are down 2 to 4 % and the S&P futures
are off 2-3% in the U.S.
The true damage is probably less important that what it may portend for all the others on the
edge of bankruptcy.
We are fortunate to be only 25% invested in our personal portfolio and in fact hold calls on
the SDS (double short S&P 500)---essentially we have no risk in the downside at this
minute. Of course the models are at risk--although not nearly the risk they would have if
they were fully invested. Expect treasuries to melt UP.
Safety Seekers Out in Force
November 20, 2009
Watching T-Bill yields this week has to make you wonder what shoe is going to drop soon.
While we have seen the 1 month bill trading with yields of 1 basis point quite a lot in the last
year-we have not seen the 3 month bill trading at that level since last December. Here is a
chart of 3 month treasury yields for the last 2 years.
Obviously there is a dramatic rush to 'safety'. When it happened in 2008 it happened as the
equity markets were crashing down.
To understand the overall market sentiment you need to watch the t-bill rates---as we now
see a lot of money piling into instruments that will pay 10 cents a year (annualized) on a
$1000 investment. You have to believe that there are some serious coming issues in the
next couple of months if you are willing to invest at these rates.
Market Euphoria Continues--Treasury Bond Yields Plunge
November 16, 2009 11 pm
The melt up in the equity markets continues--seemingly without an end in sight. It feeds on
itself---here again what are you going to do. We don't buy regular equities generally so we
just sit and watch what we are missing (or not missing--since we are most happy to sleep
well at nights and collect our dividends and interest).
Interest rates are falling again---seemingly saying 'things are tough out there'. The talking
heads are quite happy not facing up to the fact that gold is going crazy, the dollar is falling
daily, the federal government is issuing $100 billion in new debt every month and I am
afraid the housing and employment situation is not even close to improving.
Regardless of the above we are hunting and buying good income issues (while keeping
one eye on the potential economic surprises out there).
We have updated the High Quality Income Model---and it has not done nearly as well as the
High Yield Model--gaining only 4.5% year to date. This is mostly a function of being totally
underinvested. On the other hand we are happy with the portfolio being built and look
forward to better days ahead as the portfolio becomes more fully invested.
Protective Life Corp.--Solidly in the Black--a Number of Available
Picks
November 16, 2009
Proptective Life Corp., which is a smallish life insurance company located in Birmingham,
Alabama has gotten the company going back in the right direction--with the write offs behind
it. Like most insurers they had large write downs last year and hopefully with the economy
healing they will not have those large negatives ahead.
The company has a number of issues available for the income investor--3 trust preferred
issues, 2 exchange traded debt issues and of course the common shares which carry a
2.75% yield.
The way we look at the available issues is they are 5 debt issues and then the common.
The 5 issues are all senior to the common and of course somewhat safer.
The issues are
PLC Capital Trust IV--7 1/4% (Ticker--PL-PA)
PLC Capital Trust V--6 1/8% (Ticker--PL-PB)
PLC Capital Trust III--7 1/2% (Ticker--PL-PS)
Protective Life Capital Securities --7 1/4% (Ticker---PL-PD)
Protective Life 8% Senior Notes (Ticker--PLP)
All of these issues trade with current yields of 8.6 to 8.85%---super yields when they have
become increasingly hard to find. Only the PL-PD issue goes ex-dividend in December if
you are just looking to capture the dividend.
We will be adding a full 10% position (500 Shares) to our High Quality Model Portfolio of
the PL-PD issue today.
Chicken Investing Over--Back to the Grind
November 11, 2009
We have determined that no one wants to look at the realities of this dangerous market and
the economy so we just as well go about the business of getting the model portfolios
invested. Needless to say the good odds of a 'double dip' in this economy over the winter
makes us quite nervous.
Note that we have updated the High Yield Model and it has been performing very well--up
over 15% through November 2. We did sell just one item out of that portfolio--and now will
begin to add some more items in. The Blended and the High Quality Income models
remain underinvested and we hope we will have time to get some more securities in these
in the weeks ahead.
It should be noted that we are staying away from the REIT common stocks--as we have all
year. Certainly there are some decent companies out in that universe--but we just don't
care to buy the risk. Better to stay with the preferreds that many of the companies have
available.
We will be purchasing mostly exchange traded debt and trust preferreds (as we have
mostly done in the past) as these are senior to all preferreds that are out there (Trust
Preferreds are preferreds issued by a trust which holds the debt of the issuing corporation
and receives interest from the corporation which they then pay you as a dividend).
But beyond the above we will be watching this economy damned closely as the
employment situation, fuel prices and consumer confidence are all negative and we could
easily tip this economy into recession in the months ahead.
Quality Income Model Portfolio
Updated
November 16, 2009
Our High Quality Model has done relatively
poorly given its continual under invested
position most of the year. We have had this
model only 30-35% invested most of the year
and have only started to add again today with
a 10% position add of Protective Life Capital
Securities (PL-PD).
The 2 common share issues have been no
help as both Pfizer and Great Plains Energy
cut dividends during the year leaving both of
these issues with small capital losses year
to date.
The 4.5% gain year to date in this model
should move to 6% as end of year dividends
help us---but just the same it pales
compared to over 15% for the High Yield
Model.
Updated
November 16, 2009
Our High Quality Model has done relatively
poorly given its continual under invested
position most of the year. We have had this
model only 30-35% invested most of the year
and have only started to add again today with
a 10% position add of Protective Life Capital
Securities (PL-PD).
The 2 common share issues have been no
help as both Pfizer and Great Plains Energy
cut dividends during the year leaving both of
these issues with small capital losses year
to date.
The 4.5% gain year to date in this model
should move to 6% as end of year dividends
help us---but just the same it pales
compared to over 15% for the High Yield
Model.
Blended Income Model Portfolio
Updated----Nice 10% Gain with Only 43%
Invested
November 21, 2009
Although we only succeeded in getting 43%
of the Blended Income Model invested we
achieved a very nice 10% gain through
11/20/2009.
We do not feel compelled to rush into
purchases until we find the right
situation--the precarious position the
economy is in makes us nervous so we will
tread carefully.
Updated----Nice 10% Gain with Only 43%
Invested
November 21, 2009
Although we only succeeded in getting 43%
of the Blended Income Model invested we
achieved a very nice 10% gain through
11/20/2009.
We do not feel compelled to rush into
purchases until we find the right
situation--the precarious position the
economy is in makes us nervous so we will
tread carefully.
High Yield Model Portfolio
Updated
December 15, 2009
(Note that the last update was understated
by approximately 1%.)
We have updated our High Yield Income
Model Portfolio. We have scored a gain of
18.6% Year To Date.
We sold our B&G Foods Enhanced Income
shares (BGF) as they were called by the
company and we had sold the Prudential
Debt (PHR) 6 weeks ago. All issues have
performed very nicely in the last month and
of course we picked up November and
December income. Unfortunately we are
now down to 33% invested and are going to
have to get invested if we are going to have a
shot at our 11% goal for 2010.
We are searching for mispriced preferred
shares so we can garner further capital
gains in 2010--but caution has to be used
as we stare higher interest rates for this
economy in the near future.
Updated
December 15, 2009
(Note that the last update was understated
by approximately 1%.)
We have updated our High Yield Income
Model Portfolio. We have scored a gain of
18.6% Year To Date.
We sold our B&G Foods Enhanced Income
shares (BGF) as they were called by the
company and we had sold the Prudential
Debt (PHR) 6 weeks ago. All issues have
performed very nicely in the last month and
of course we picked up November and
December income. Unfortunately we are
now down to 33% invested and are going to
have to get invested if we are going to have a
shot at our 11% goal for 2010.
We are searching for mispriced preferred
shares so we can garner further capital
gains in 2010--but caution has to be used
as we stare higher interest rates for this
economy in the near future.
High Yield Model Portfolio - End
of Year Recap
January 2, 2010
The High Yield Model Portfolio ends the year
with a very solid 20% gain.
The portfolio is now only 35% invested as we
had the US Cellular debt called away on
12/24/2009 and we purchased the telecom
company Otelco on 12/17/2009.
We had over $5100 in interest and dividends,
almost $3500 in closed out gains and over
$11,000 in capital gains on owned securities.
As always our challenge is to get the portfolio
invested versus holding so much cash and
we believe that we can root out some
bargains to keep this portfolio humming.
of Year Recap
January 2, 2010
The High Yield Model Portfolio ends the year
with a very solid 20% gain.
The portfolio is now only 35% invested as we
had the US Cellular debt called away on
12/24/2009 and we purchased the telecom
company Otelco on 12/17/2009.
We had over $5100 in interest and dividends,
almost $3500 in closed out gains and over
$11,000 in capital gains on owned securities.
As always our challenge is to get the portfolio
invested versus holding so much cash and
we believe that we can root out some
bargains to keep this portfolio humming.
Blended Income Model Portfolio
End of Year Review
January 11, 2010
We have gotten the Blended Income Model
Portfolio updated and the results for the year
have been pretty good---a gain of
11.6%--which is very satisfying for a portfolio
that has been only 50% invested.
The gains break down like this---$3591 in
dividends and interest, $2824 on a realized
gain and $5161 on unrealized gains.
With a goal of 9% for 2010 we are going to
have to work hard to get further invested.
End of Year Review
January 11, 2010
We have gotten the Blended Income Model
Portfolio updated and the results for the year
have been pretty good---a gain of
11.6%--which is very satisfying for a portfolio
that has been only 50% invested.
The gains break down like this---$3591 in
dividends and interest, $2824 on a realized
gain and $5161 on unrealized gains.
With a goal of 9% for 2010 we are going to
have to work hard to get further invested.
